Stocks in Asia fell Wednesday as investors digested consumer and producer price data from China that showed both measures registering contractions simultaneously for the first time since 2020.
Shares in Japan fell as benchmarks in mainland China and Hong Kong opened lower. This offset gains in South Korea while Australian equities traded mostly flat.
China’s inflation data showed a 0.3% drop in consumer prices in July from a year ago, less than the median forecast of a 0.4% contraction. Producer prices fell 4.4%, more than forecast. The Chinese currency extended gains driven partly by a stronger-than-expected yuan fixing.
“China is in deflation, for sure, the question is for how long.” Robin Xing, chief China economist for Morgan Stanley in an interview with Bloomberg Television. “It’s up to the policy makers how they react.”
Declines for Chinese equities followed a 2.4% drop on Tuesday for a measure of US-listed Chinese stocks after a larger-than-forecast slump in trade. Problems at Country Garden, once China’s largest developer, are adding to the gloom with its shares falling as much as 8.9% in early trading.
US equity futures ticked higher in Asia after shares trimmed losses on Tuesday as dip buyers emerged following a slide driven by worries about the financial system and the economy.
Treasury yields fell across the curve, extending a rally on Tuesday that was helped by a well received three-year note auction. Australian and New Zealand 10-year bond yields also fell by around four basis points. The dollar was steady after touching its highest level in over a month in the prior session amid haven demand on worries over everything from China’s outlook to the health of US and Italian banks.
The equity declines on Wall Street waned in afternoon trading, with the S&P 500 finishing down by 0.4%. Apple Inc. halted its longest losing streak this year. Eli Lilly & Co. led gains in health-care companies after sales of its weight-loss treatment blew past expectations and a new study raised the prospect that its drug could benefit heart disease as well. Banks fell as Moody’s Investors Service downgraded 10 small and midsize American lenders and said it may do the same with a handful of major firms.
The recent “orderly” pullback in US stocks has reduced the risk of a chaotic selloff and reduced some of the short-term positioning risk that has been a worry for investors, according to Chris Montagu, a strategist at Citigroup Inc.
After the closing bell came news that Walt Disney Co.’s ESPN has signed a long-term exclusive partnership for sports betting with Penn Entertainment Inc., a regional casino operator. Shares in WeWork Inc. fell 25% in post-market trading after the company said there was “substantial doubt” about its ability to continue operating, citing sustained losses and canceled memberships to its office spaces.
Treasury 10-year yields dropped to around 4% in Asian trading. Tuesday’s $42 billion sale of three-year notes produced a lower-than-expected yield, a sign that demand was stronger than anticipated.
Just a few days before a key inflation report, investors also waded through remarks from central bank officials.
Fed Bank of Philadelphia President Patrick Harker said the central bank may be able to cease rate hikes, barring any surprises in the economy, though rates would need to stay at their current elevated levels for some time. Harker also noted that “sometime probably next year, we’ll start to bring the interest rates down.” His Richmond counterpart Thomas Barkin argued it was too soon to say whether another an increase in September would be appropriate.
Oil edged lower Wednesday after a rebound Tuesday as Ukrainian President Volodymyr Zelenskiy said his country would retaliate if Russia continues to block its ports. Copper — a barometer of the global economy — slid on the disappointing Chinese trade figures.
Key events this week:
- China CPI, PPI, Wednesday
- India rate decision, Thursday
- US initial jobless claims, CPI, Thursday
- Atlanta Fed President Raphael Bostic pre-recorded remarks for employment webinar, Thursday
- UK industrial production, GDP, Friday
- US University of Michigan consumer sentiment, PPI, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.1% as of 11:04 a.m. Tokyo time
- Nikkei 225 futures (OSE) rose 0.2%
- Japan’s Topix fell 0.2%
- Australia’s S&P/ASX 200 was little changed
- Hong Kong’s Hang Seng fell 0.4%
- The Shanghai Composite fell 0.3%
- Euro Stoxx 50 futures rose 0.9%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0964
- The Japanese yen was little changed at 143.37 per dollar
- The offshore yuan rose 0.1% to 7.2291 per dollar
- The Australian dollar was little changed at $0.6541
Cryptocurrencies
- Bitcoin fell 0.5% to $29,845.02
- Ether fell 0.3% to $1,858.29
Bonds
- The yield on 10-year Treasuries was little changed at 4.01%
- Japan’s 10-year yield declined 2.5 basis points to 0.580%
- Australia’s 10-year yield declined two basis points to 3.99%
Commodities
- West Texas Intermediate crude fell 0.2% to $82.79 a barrel
- Spot gold rose 0.1% to $1,927.73 an ounce
This story was produced with the assistance of Bloomberg Automation.
